After entering your email address, a confirmation email will be sent to your inbox. Please approve this email to receive our weekly eBook update. We will not share your personal information with any third party.

This is a Premium eBook

Bookboon Premium - Get access to over 800 eBooks - without ads

You can get free access for a month to this - and 800 other books with the Premium Subscription. You can also buy the book below

About the book

Reviews

Ali Dausy Massally
★★★☆☆

A very useful introductory guide to the subject that provides a foundation quite unlike many. A simple step by step guide dealing with complex issues in plain terms.

Gunter Joachim
★★★★★

16 June 2014

Really enjoy the layout. It's structured and understandable.

Description

It is an understatement to say that the forex markets of the world are immense. The high level of turnover indicates that the forex market is an efficient market, ie price discovery is sound. It is a quote-driven market (as opposed to an order-driven market) and it is firmly the banks’ province. They quote bid and offer rates simultaneously once the volume of the transaction is disclosed, and the quote recipient can deal either side of the quote. As in the spot forex market, the derivative forex market is efficient, allowing, for example, a company to do a large forward deal as quickly as a spot deal. The company can also do currency swaps, forward-forwards, option date forwards, and more, at the drop of a hat. In this book all aspects of the forex market are covered: organisational structure, cross rates, spreads, quotation conventions, role and importance of exchange rates, participants, relationship with the balance of payments and the money stock, and other relevant issues.

Content

Essence

Learning objectives

The foreign exchange market in a nutshell

Organisational structure of the forex market

Monetary unit

Foreign exchange and bank deposits

International spot rate quotation conventions

Two-way spot prices

Spread

Cross rates

Foreign exchange risk: appreciation and depreciation

Spot and derivative forex markets

Why exchange rates are important

Summary

Bibliography

Derivatives: forwards

Learning objectives

Introduction

Derivatives markets

Definition of a forward

Types of forwards

Outright forward foreign exchange contracts: functions and pricing

Forward exchange market

Summary

Bibliography

Derivatives: futures, options & swaps

Learning objectives

Introduction

Currency futures

Currency options

Currency swaps

Summary

Bibliography

Risks other than currency risk & other risk management tools

Learning objectives

Introduction

Risks other than currency risk in investments

Other risk mangement tools

Summary

Bibliography

Participants

Learning objectives

Introduction

Authorised dealer banks

Foreign exchange brokers

Foreign banks

Central bank

Government

Retail clients

Non-bank authorised dealers

Corporate sector

Arbitrageurs

Speculators

Summary

Bibliography

Effect on money stock & money market liquidity

Learning objectives

Introduction

Money identity

Money market identity

Purchases and sales of forex, M and the liquidity shortage

Forward market operations of the central bank

Forex swaps by the central bank

Summary

Endnotes

About the Author

Alexander Pierre Faure graduated from Elsenburg Agricultural College after school and went on to Stellenbosch University where he graduated with BA (Commerce), Hons BA (Economics), MA (Economics), and PhD (Economics).

He also successfully completed the Stockbroker Examination Requirements at Witwatersrand University (and is a registered Stockbroker - presently non-broking status).

He first worked for the central bank, where he was involved in compiling the monetary statistics (money stock and sources of change, and money market liquidity analysis) and later in the execution of monetary policy.

His career after central banking included private sector banking (the recipient of monetary policy), stockbroking (influenced by monetary policy) and interest rate analysis (reading monetary policy).

After his private sector experience, he became an academic and held the positions Investec Chair in Money and Banking (at Rhodes University and the University of Fort Hare) and Foord Chair in Investments (at Rhodes University).

He is currently at Rhodes University where he teaches financial markets and monetary economics.